Dell Earnings Surge on AI Backlog

Dell Technologies Inc. (DELL) reported record fiscal second-quarter results on Sept. 1, 2026, driven by strong demand for AI-optimized servers. The company’s widened revenue visibility from its AI infrastructure backlog prompted an upgraded fiscal 2027 outlook.

Record Quarter and Raised Guidance

For the three months ended July 31, 2026, Dell posted consolidated revenue of $47.0 billion, up 58.0% year over year, with GAAP diluted earnings per share (EPS) of $6.34 and non-GAAP diluted EPS of $7.04. The company described the adjusted EPS as a record, beating Wall Street consensus by about $2.10 per share. CFO David Kennedy said, “In our second quarter, we delivered record revenue of $47 billion, record EPS and a record $4.3 billion returned to shareholders.” Dell raised its full-year fiscal 2027 revenue guidance to $192.0 billion and non-GAAP EPS guidance to $25.50, marking a second upward revision. The company also provided third-quarter adjusted EPS guidance of $6.50.

Gross profit rose 80.0% to $9.83 billion, with gross margin expanding to roughly 21.0% from 18.3%, driven by improved Infrastructure Solutions Group (ISG) mix. GAAP operating income increased to $5.39 billion, lifting operating margin to 11.5% from 6.0%. On a non-GAAP basis, operating income was about $5.9 billion, with operating margin climbing to 12.6% from 7.7%.

AI Backlog and Segment Performance

ISG led growth with record revenue of $31.8 billion, up 89.0% year over year and marking the tenth consecutive quarter of double-digit growth. Management reported that AI-optimized servers generated about $16.4 billion in revenue, traditional servers and networking contributed roughly $10.53 billion, and storage added about $4.85 billion. The AI-driven product mix expanded margins in the segment.

The company’s backlog tied to AI infrastructure reached about $95 billion, with $60.9 billion of AI server orders booked during the quarter contributing to that backlog. Management said this backlog provides multi-quarter revenue visibility.

Dell’s Client Solutions Group (CSG) posted roughly $15.0 billion in revenue, up 20.0% year over year. Commercial sales rose 22.0% to about $13.2 billion, the strongest commercial growth in over four years, while consumer revenue increased 7.0% to $1.8 billion, marking the fourth consecutive quarter of growth. The segment’s revenue was slightly below some estimates but contributed to diversification.

Cash Flow and Capital Returns

Cash flow from operations was $2.2 billion, down about 13.0% from a year earlier. The company reported adjusted free cash flow of $8.1 billion for the quarter and trailing-12-month adjusted free cash flow of $18.1 billion. A separate calculation using a different free cash flow definition showed $986 million, down about 47.0% year over year, reflecting higher capital spending.

Dell ended the quarter with $14.2 billion in cash and investments and a core leverage ratio around 0.8x. The company returned a record $4.3 billion to shareholders through share repurchases and dividends. The board declared a quarterly cash dividend of $0.63 per common share, payable Oct. 30, 2026, to shareholders of record Oct. 20, 2026.

Investor sentiment is broadly bullish on accelerating AI infrastructure demand and margin leverage, but the combination of stretched expectations, mixed cash flow measures, and the need to convert a large backlog into sustained revenue has focused attention on the sustainability of server momentum and near-term cash flow dynamics.